This is the title of a great GaveKal piece by Louis Gave
DB is down again today
why banks are underperforming big time? i guess the most lucrative parts of the business, trading , market making were shut down by the regulators. On top of that the costs of regulation compliance etc... just keep rising.
On top of that when the interest banks charge companies is much higher that the GDP growth rate there is going to be trouble ahead. In Europe many countries the costs of financing debt are higher than GDP growth Italy, Greece, etc.....
“How To Build A Company Where The Best Ideas Win”, Ray Dalio
In weak companies politics win. In strong companies best ideas do - Steve Jobs
Most companies do things just because it's the way they do things. No one knows why!
in my view the way to do well is to use data/information and as Isaac Asimov explains in his Foundation series.
The premise is that with the use of statistics you can gather up all prior history and use it to predict the future.
Bridgewater is not a quant shop but they definitely use data extensively.
when you use data to figure out what to do how does it work in practice?
a)you find people who were successful and see what they have done. if there is a pattern do it.... If the sample is short don't use but if you find thousands of people in history who have done something perhaps ......it works
b)you find some sign that usually precedes x if you find that sign you know x is probably coming soon again the sample is key
c)you find something that has a probability of 60% should you do it? depends if it's only one bet i wouldn't do, but if you can do thousands of small bets with a 60% probability i would win for sure. i would not play russian roulette because despite having very good odds.....
most companies just do what they do without knowing why, just try to implement the system where the best ideas win how do Bridgewater do it
one very interesting feature of his company is the weight each person opinion has.
if you have been right recentely your opinion is worth more than the next guy
One system that can work is to put a very smart guy as a CEO and he listens to lot's of people and just decides at the end trying to figure out what is the best idea. It doesn't make you the best company but you could survive
Saturday my wife was stuck in Nice (She attended the
Cannes media week ). Strikes all over France, once finally inside the plane the
airport handling guys hit the plane with the stairs and they had to go back to
a hotel because the plane was damaged. Of course it takes hours to embark and
disembark and to get the Hotel Voucher. Next day no food service because of
another strike and the plane stayed in the Tarmac for 2 hours without water
waiting for the controllers to give the green light. Why do European equities
underperform? Because there is not a culture of delivering a service. People
(public service) don’t care about the final client. I will short Europe
anytime. Not all Europe UK is not like that and Switzerland too.
Sometimes I tell my kids it’s easy to do well in life,
why because 90% of the people don’t care they don’t care the way they put
dishes in the washing machine, they don’t care the way they make their bed,
they don’t care the way they park the car. Lots of people need someone that
comes after to fix the job. If you care you are in the top 10% just
like that. In Nice they don’t care.
